Economy
All You Need to Know About Trading in Currency Market
Online trading of currencies is gaining momentum all around the world since the last two decades. Africa alone today has estimated approx. 1.3 million forex traders, South Africa and Nigeria are the leading countries with around 400,000 traders locally combined.
The currency market is a decentralized international financial market where buying, selling and exchange of global currencies among buyers and sellers take place.
In the currency market, the values of currencies are determined based on supply and demand, and it is the largest financial market with transactions crossing over $6.6 trillion per day.
The bulk of currency trading volume comes from trading between banks, institutions, governments and companies. But approximately 5.5% of trading volume constitutes of retail investors and this figure is growing.
The advancement in internet, electronic trading tech, the rise of low-cost brokerages and the availability of diverse trading platforms to African traders have caused online trading to gain popularity among retail investors in Africa, especially Nigeria and South Africa.
How does currency or Forex market work? What decides currency rates?
Currency trading is the buying, selling and exchange of currencies like Euro or the US Dollar or any other two currencies against one another; where you give one currency to get another.
If you have travelled abroad or ordered something online from a different country in another currency like EUR or USD, then it is likely you have made a forex transaction.
Currency trading always involves trading between a pair of currencies. In contrast to stock trading where you buy a company’s share, it involves taking a position on a currency pair.
For example, GBP/USD represents the value of how much US Dollars you can buy with one Pound. If you think that Pound’s value will rise, you buy GBP with dollars. If your prediction is right, you could make a profit. Similarly, you can trade any other currency available in the Forex Market.
FX or currency market works on a simple economic concept of demand and supply. For instance, if there are more buyers for the US dollars in the market, its value will appreciate and vice-versa.
The demand and supply are affected by global trade, geopolitical events, interest rates and financial news. These factors create volatility in the currency market which in turn creates an opportunity for traders to speculate on the movements of currency prices.
For example, if the US Federal Reserve announces a higher interest rate, then US dollars will appreciate and other weaker currencies will likely depreciate against it.
What differentiates FX from other financial markets is that it operates 24 hours in different time-zones. It means when the trading day ends in the US, it begins in Japan and Hong Kong. That’s why currency prices are constantly changing.
How are currencies traded?
Currencies are always traded in pairs like EUR/USD or GBP/EUR.
There are mainly four ways how institutions, companies and individuals trade in FX market: spot contracts, swaps, forward and options. Swaps account for roughly 50% of the total FX trade.
Forex Spot, Forward and Swap Contracts
Most actual trade or non-speculative trade of currencies between banks, corporations, the governments take place using contracts like spot, forward and swaps.
In the Spot FX, currencies are exchanged at the current market price or exchange rate. Spot trades are usually settled within 2 days of contract and the majority of currency trading takes place through swaps.
Swap, also known as a cross-currency swap, is an agreement between two parties to exchange two different currencies at a predetermined spot-rate over a period of time. Swaps are more common among financial institutions or governments. Global companies usually get into a currency swap mainly for securing cheaper debts.
The forward contract is similar to spot trading, except in this the currency exchange occurs in the future. A forward contract entails an agreed-upon exchange rate, volume and a specified maturity date. When the contract reaches it maturity date, the buyer has to pay the amount at the agreed-upon exchange rate. The buyer may incur losses if the current spot rate is lower than the pre-agreed rate.
Currency Derivatives
Currency derivatives are of two types options or futures. Currency derivatives are considered one of the best options to manage currency-risks. They are usually exchange-based futures and options contracts. These future-oriented currency contracts can be purchased at a predetermined price and date.
FX Options is a contract where a buyer obtains the right to buy foreign currencies from a seller at a specified rate and date. The buyer, however, is not obligated to buy it. Similar to insurance, the buyer just needs to pay the premium to buy an FX Option. FX Futures contract is similar in nature but parties are obligated to settle the contract.
Multinational corporations usually use FX Options to protect their investments from currency fluctuations.
Locally in Nigeria, the Nigerian Stock Exchange (NSE) is planning to introduce financial derivatives next year. Currently, LCSE offers trading in four asset classes including currencies (both local and foreign). In the rest of Africa, JSE offers currency derivatives on all major currencies against ZAR.
Currency CFDs
A contract for difference (CFD) is an agreement between the two parties (trader and broker) to exchange the difference in the price of an underlying asset at the end of the trade. The difference in price is calculated from the point when the contract opened to when it ended. In CFD trading, neither broker nor the investor owns any underlying asset.
Most retail forex traders trade forex online as CFDs with retail forex brokers. But there are no locally regulated forex brokers in Nigeria.
All the best forex brokers available in Nigeria are foreign brokers that offer CFDs on currency pairs. As online forex trading is still unregulated in Nigeria, traders must ensure they only trade with top-tier regulated brokers for safety of their funds & fair-dealing; like through brokers regulated by FCA or ASIC or CySEC.
How currency trading can be risky?
The Forex market is inherently risky. The risks range from market risks like extreme volatility to other risks like the use of high margin.
Here are some of the risks that you should watch out for:
Market volatility and unpredictability
The forex market can be highly unpredictable. The release of a new economic data or a new bilateral/regional trade deal can cause volatility in the Forex market.
Major currency pairs tend to remain relatively stable. But exotic currency pairs which have lower trading volumes can be very volatile.
Volatile currencies tend to move in any direction based on a market event or even without it in some cases. The unpredictable movement can cause huge losses.
Leverage and margin risk
The availability of high leverage is one of the reasons why currency trading is why so many traders get attracted to it.
Leverage can amplify a trader’s profit but at the same time, the unwise use can cause significant losses.
For example, in a 100:1 leverage factor, a trader could trade USD$10,000 with just $100 margin deposit. So, suppose a currency pair made a 1 pip loss that means loss of $1. If it changes to 50 pips loss than half of your margin money could be gone in seconds.
Counterparty or third-party risk
Risks related to counter-party or market maker or Broker, where they are not able to fulfil your contract or order due to credit risk or volatile market conditions is another major risk factor. And sometimes these counterparties also deal in malpractices.
There have been numerous instances in the past when people were fooled through Ponzi schemes & bad brokers. For the safety of your capital, one must always choose a broker that is regulated by multiple Tier I and Tier II regulators.
Other risks to know
There are other associated risks too with trading currencies including Country risk, Interest Rate Risk, Transaction Risk, Liquidity Risk etc. One must understand all these risks and try to mitigate them before trading.
Another major risk is of losing money. There is no denying that Forex trading is very risky. Roughly 60-70% of traders lose their capital due to different reasons. However, unwise use of leverage is considered one of the top reasons for trading-losses.
One can possibly mitigate some of these risks by adopting a sound trading plan, using leverage (max 1:10) and proper risk management.
By Adedapo Adesanya
The Minister of Solid Minerals Development, Mr Dele Alake, has called on foreign investors to consider Nigeria amid prevailing barrage of tariffs imposed by the United States, which he says may be a blessing in disguise for African countries.
Speaking during the Fireside Chat session on Foreign Direct Investment in Abu Dhabi, United Arab Emirates, the Minister called on African countries to adopt an introspective approach by looking inward and adjusting their domestic policies to focus more on intra-African trade, with less dependence on external forces.
In a statement by his Special Assistant on Media, Mr Segun Tomori, on Sunday in Abuja, it was stated that the Minister’s remarks were part of his contribution to the discourse on the impact of the tariffs on Africa’s economic climate.
“The barrage of tariffs imposed carries wide-ranging implications for the global economy, U.S. trade relationships, and developing nations, including those in Africa,” he said.
He stressed the need need for African countries to organise economic imperatives to ensure a balance of trade and strengthen intra African trade among countries.
Mr Alake highlighted the persistent challenge faced by African countries, where rare mineral resources were exported without any value addition, noting that the old ‘pit-to-port’ model, where resources are extracted and sent out of the continent can no longer be allowed to continue.
“Interested investors, who wish to come into Africa are welcome to set up their factories in the continent, add value to our mineral resources and create jobs here, rather than just shipping our wealth out of our shores”, he stated.
The minister said that his stance on protecting Africa’s mineral wealth has been adopted by many African countries, particularly mineral-producing nations, where he served as the pioneering chairman of the African Minerals Strategic Group (AMSG).
He reaffirmed that Nigeria’s policy on mineral sector development remained strictly focused on value addition and boosting the local economy through job creation.
By Adedapo Adesanya
Arnergy, a cleantech startup, has raised a $15 million Series B extension, on top of a $3 million B1 round last year, bringing its total for the round to $18 million to boost solar energy access in Nigeria.
According to TechCrunch, the new funding round was led by Nigerian private equity firm CardinalStone Capital Advisers (CCA) and saw participation from Breakthrough Energy Ventures as well as British International Investment, Norfund, EDFI MC, and All On.
Launched in 2013, Arnergy was established to provide solar systems to homes and businesses across sectors like hospitality, education, finance, agriculture, and healthcare.
The firm raised a $9 million Series A in 2019 backed by Bill Gates’s Breakthrough Energy Ventures.
The Lagos-based cleantech is in talks to raise additional local debt from banks and development financial institutions (DFIs) to support some of its projects including energy-as-a-service (EaaS) solutions for multinationals.
The cleantech is planning to install more than 12,000 systems by 2029 to help boost access to solar energy, which Nigerians have began to adopt increasingly following policy shifts, particularly the removal of fuel subsidies, that led to rise in energy costs.
Arnergy has so far deployed over 1,800 systems across 35 Nigerian states, totaling 9MWp of solar and 23MWh of battery storage.
Over the next four years, it will be targeting a 567 per cent increase to the set 12,000 systems goal.
According to the founder, Mr Femi Adeyemo, there has been increased adaptation of solar energy and this presents the perfect opportunity.
Its lease-to-own product, Z Lite, has gained more traction as customers pay fixed monthly fees over 5 to 10 years before owning the system while outright purchases comprised 60 per cent to 70 per cent of revenue in 2023, accounting for just 25 per cent of sales last year, as per TechCrunch.
“Imagine paying N200,000 (~$125) every month for power. With our product, that drops to N96,000 (~$60). Over five years, it’s a no-brainer what you’ll save,” Mr Adeyemo told the tech publication.
Recall that the federal government has also announced plans to ban importation of solar panels as part of efforts to boost local capacity. This has been projected to see a substantial increase in prices.
Speaking on this, Mr Adeyemo said, “We’re advocates for local manufacturing. But let’s build capacity before shutting the door on imports. Otherwise, we risk doing more harm than good, both to the industry and to the millions of Nigerians who now rely on solar as their primary energy source.”
By Adedapo Adesanya
The total value of stocks at the NASD Over-the-Counter (OTC) Securities Exchange increased by 0.40 per cent or N9.21 billion to N1.919 trillion in the 15th trading week of 2025 from the N1.911 trillion it ended in Week 14.
The growth was mainly influenced by the inclusion of new shares of Infrastructure Credit Guarantee Company Plc (InfraCredit) to the trading platform in the week.
InfraCredit joined the alternative stock market on March 6 and last week, it brought addition 11.166 million equities, which increased its total securities at the NASD OTC exchange to 26.421 million units.
However, the NASD Unlisted Securities Index (NSI) went down by 0.20 per cent or 31.89 points to 3,277.57 points from the 3,309.46 points it ended a week earlier.
In the week, the total value of trades ballooned by 29,234.5 per cent to N4.79 billion from the N16.3 million recorded in the previous week, and the total volume of transactions increased by 1,485.1 per cent to 171.4 million units from 10.8 million units.
The bourse recorded seven price losers led by Nipco Plc, which depreciated by 20.2 per cent to close at N199.00 per share versus N220.00 per share, Central Securities Clearing System (CSCS) Plc lost 2.5 per cent to finish at N22.70 per unit versus N25.21 per unit, FrieslandCampina Wamco Nigeria Plc shed 1.3 per cent to sell for N35.55 per share against the former value of N36.80 per share, and Afriland Properties Plc went down by 0.6 per cent to N17.80 per unit from N18.42 per unit.
Further, Geo-Fluids Plc slipped by 0.5 per cent to N2.00 per share from N2.48 per share, Acorn Petroleum Plc slid by 0.2 per cent to N1.17 per unit from N1.30 per unit, and InfraCredit Plc declined by 0.09 per cent to N2.34 per share from N2.43 per share.
On the flip side, Mixta Real Estate Plc improved by 0.4 per cent to N4.55 per unit from N4.14 per unit, Lagos Building Investment Company (LBIC) Plc expanded by 0.2 per cent to N2.63 per share from N2.80 per share, First Trust Microfinance Bank Plc appreciated by 0.04 to 62 Kobo per unit from 58 Kobo per unit, and Paintcom Investment Plc gained 0.02 per cent to end at N10.74 per share compared with the preceding week’s N10.72 per share.
The most active stock in the week by value was Okitipupa Plc with N4.6 billion, Paintcom Investment Plc recorded N190.9 million, FrieslandCampina Wamco Nigeria Plc traded N28.0 million, Nipco Plc transacted N3.5 million, and 11 Plc recorded N1.7 million.
Okitipupa Plc was also the most traded stock by volume with 152.1 million units, Paintcom Investment Plc transacted 17.8 million units, FrieslandCampina Wamco Nigeria Plc recorded 0.751 million, Geo-Fluids Plc traded 0.356 million units, and Food Concepts Plc exchanged 0.180 million units.
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